Independent retailers see some banks willing to offer consumer credit but 0pc
interest deals remain the order of the day

Independent retailers are seeing a recovery in the range of credit options they can offer customers to encourage them to make big buys.

Cycle shops said new suppliers had successfully replaced market leaders Lloyds and HSBC, whose retail finance arms withdrew abruptly from serving all but the motor trade during the recession, severely disrupting the market.

However, competition for business remains limited, they report, with Secure Trust Bank’s Moneyway service emerging as the main supplier to the sector, through the "Ride it Away" scheme.

Music shops say the mooted prospect of Santander competing for their custom failed to materialise and they now rely on Moneyway through its partnership with the Arts Council.

Public spending cuts have meant the Arts Council scheme, which had subsidised the interest rate cost to retailers of offering 0pc finance on musical instruments, has been scaled backed. It said 330 music shops across England used the scheme, called Take it Away, but that its 70pc reduction in funding for such schemes meant that from April 1 it is now only available to customers aged between 18 and 25.

"We didn’t have the money to put behind it any more," said a spokesman. The scheme faces more potential upheaval because the Arts Council has to make a further 50pc cut to its remaining "administration" budget – funding that is not spent directly on arts organisations – by 2015.

Lee Anderton, of Andertons Music in Guildford, said the Arts Council scheme, which was first provided by HFC before it pulled out and is now supplied by Moneyway, was working well. "It is critical. We are selling aspirational products and some of our professional products will retail for £1,000. If we can’t offer an easy, fast and simple credit system to the customer we have a problem."

By offering monthly repayments, Andertons can turn someone with a £500 budget into a £900 sale, he said. "The customer walks out with an instrument that’s much better than the one they thought they could afford and the shop makes a higher sale."

Mr Anderton’s main concern was the cost of providing 0pc finance. "Interest free credit is not an entirely truthful explanation. The retailer is paying the interest rate rather than the customer. We’ve been trying to say to our suppliers it’s not fair the retailer bears the full cost when the supplier benefits from the sale."

He said some manufacturers, like Marshall amps and Roland, were now sharing the cost, he said. Mark Walmsley from ActSmart, a retail membership organisation, said the bank decisions "came out of nowhere". "What had historically been half of the retail finance market announced it was exiting.

It meant a lot of large retail groups were also looking for finance. We are realistic. They are far more attractive. For us, a bunch of disparate independents that each had to be signed up and assessed individually, was a challenge."

ActSmart has signed up 500 retailers to the Moneyway finance scheme and is planning to roll it out to independent outdoor wear and equipment specialists and snow sports retailers. It also plans to tackle the dominance of 0pc credit, introducing 4.9pc and 19.5pc rates, and lobbying manufacturers to bear some of the cost of offering credit finance.

Mr Anderton said selling costly credit to customers was hard. "As soon as you start telling the customer it’s not 0pc their interest falls through the floor," he said.

Andy Shrimpton, of Cycle Heaven in York, said the upheaval in retail finance a year ago had actually improved the provision of retail finance for cycle shops. "We used to deal with a provider that was particularly rubbish, Blackhorse. Their rates were not great and the system was a bit creaky," he said.

"We now have a system that has better terms, better rates and much better approval rates. It would be good to have more competition but I’m pleased we’ve replaced someone who was a bit conky with someone more focused and doing a good job."

John Hutchinson, of Cheltenham-based Hutchinson Hi-Fi & Vision, said his credit provider – Barclays Partner Finance – was rejecting more customers but he was satisfied with the service. "They have tightened up their criteria. We get about a 75pc success rate on those that we put through. In days gone by it would have been 90pc."

Simon King from Retra, the trade body for independent electronics retailers, said many retailers saw customers being declined credit. "Consumers aren’t getting clearance for credit in stores and are instead opting to put everything on credit cards," he said.

Barclaycard, which operates Barclays Partner Finance, said it had to "find the right balance between our products being available to end consumers and being responsible in our lending practices".

A spokesman added: "We have growth aspirations for our point-of-sale loans business and expect to see increasing levels of lending over the coming months."